Donald Trump and J.D. Vance Say No Cuts for Social Security. That's Impossible.

[Muda69]

https://reason.com/2023/01/23/donald-trump-and-j-d-vance-say-no-cuts-for-social-security-thats-impossible/

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As Congress prepares for a fiscal policy fight over raising the federal government's debt ceiling, former President Donald Trump and one of the rising stars of the national conservative movement have issued a sharp demand: Don't touch Social Security.

"Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security," Trump said in a video message released by his presidential campaign Friday night. Shortly afterward, Sen. J.D. Vance (R–Ohio) posted his agreement, tweeting that "Trump is 100 percent correct."

Refusing even to consider changes to Social Security might be a tidy way to pander to older Americans, but it's not a functional plan for entitlements. In fact, it's actually an impossible situation.

If Congress refuses to do anything to alter Social Security's trajectory, benefit cuts will automatically kick in when the program hits insolvency. That point will be reached in 2035, according to the most recent Social Security Administration trustee's report. If that happens, the trustees estimate that Social Security will be able to pay only 80 percent of promised benefits.

Promising to do nothing, then, amounts to promising a 20 percent benefit cut in a little more than a decade. There is no getting around that fact.

That's a classic political strategy: Kick the can and deal with the consequences later. Even so, Trump, Vance, and others who advocate this approach should be confronted with the reality of what they are saying: full benefits for anyone getting Social Security now, but guaranteed cuts for anyone who expects to collect Social Security after 2035.

If you want to avoid cutting a single penny from Social Security but also dodge the benefit cuts coming in the middle of the next decade, the only available option is to raise taxes. Big time.

The combined shortfall for Social Security and Medicare—the federal old-age health insurance program, parts of which are headed for insolvency before the end of this decade—will amount to 6 percent of gross domestic product (GDP) by the mid-2040s, according to Brian Riedl, a senior fellow at the Manhattan Institute and former Senate budget staffer. That translates to about $1.4 trillion in today's dollars, though the actual amount will change (and likely grow) depending on GDP and the future value of the dollar.

Keeping those two programs solvent, without cuts, would therefore require a tax increase of well over $1 trillion. If Congress passed a 9 percent payroll tax hike, that wouldn't be enough—it would also need to create something like a 20 percent value-added tax (VAT), which would function like a federal sales tax, to cover the rest of the shortfall.

In a nutshell, those are the two options for policymakers who refuse to cut "a single penny from Medicare or Social Security." Inaction will postpone benefit cuts for another decade, and avoiding those benefit cuts would require tax hikes that might be politically impossible. It's a tricky situation, but ignoring its complexity only makes the problem harder, because the countdown to insolvency will continue.

Realistically, the only serious approach will require some changes to existing Social Security benefits. That could mean reducing benefits for wealthier retirees or implementing across-the-board benefit reductions that would be phased in over time, allowing younger workers to offset smaller Social Security benefits with private savings. Ideally, workers would be able to opt out of Social Security altogether, so they can save and invest for their own retirement without having to pay payroll taxes.

But none of those options can begin to be considered if a critical mass of Republicans adopts the short-sighted view advocated by Trump and Vance.

That's particularly galling in Vance's case, given his previous support for a more thoughtful and workable approach to Social Security's fiscal issues. On his personal blog (where he went by the name "JD Hamel"), Vance wrote approvingly in 2011 of plans put forth by then-Rep. Paul Ryan (R–Wisc.) to balance the budget and reform entitlements. In a 2010 post, he correctly pointed out that the "political obstacles" to entitlement reform "intimidate more than the practical problems."

"The Republican Party," he wrote, "is also the party of the aging white person. The party's only solid constituency thus depends on the Medicare and Social Security Benefits that are the biggest roadblocks to any kind of real fiscal sanity."

More than a decade later, Vance is now living that reality. A decade from now, the country will be dealing with the consequences of his newfound shortsightedness.

Agreed.  Social Security and other federal entitlements are bankrupting this country.  They need to all be abolished.

 

[Muda69]

Social Security Is on the Brink of Collapse. The GOP Won't Touch It.: https://reason.com/2023/01/26/social-security-is-on-the-brink-of-collapse-the-gop-wont-touch-it/

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If you follow policy debates long enough, arguments you never thought you'd hear can become key components of the two parties' policy platforms. That's certainly the case when it comes to some Republicans and their new "never touch Social Security and Medicare" position.

Over the weekend, newly elected Sen. J.D. Vance (R–Ohio) tweeted that former President Donald Trump was 100 percent correct to demand that "under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security." Vance's tweet was issued amid the debt ceiling fight, but this position has long been held by Trump.

Now, to be fair, the GOP's well-intentioned engagement in the overall debt ceiling dispute is limited by the short time Congress has to raise the limit, all but ruling out credible reforms of Medicare or Social Security. Reforming these two programs will take a considerable amount of time and requires bipartisan action. However, this reality is no reason to assert that the programs' benefits should never be touched.

I cannot wait to hear the grand plan that the "don't touch Social Security and Medicare" Republican caucus has to address the $116 trillion over 30-year shortfall—that's 6 percent of U.S. GDP—facing the two programs. No action from Congress means no money to pay for all the benefits. That means enormous cuts that will hurt the low-income seniors who truly depend on the programs.

Of course, if Vance and friends insist on not touching benefits, they could address the Social Security and Medicare shortfalls with enormous tax hikes. For Social Security alone, when the trust fund dries out, they will have to agree to immediately raise the payroll tax from 12.4 percent to 15.64 percent—or close to a 25 percent tax increase. Add to that the tax hike necessary for Medicare and then repeat the exercise over the years to fill the entire shortfall.

It's not as if we haven't been warning politicians that these troubles were brewing. Back in 2000, roughly when I started working on fiscal issues, experts already warned that the Social Security trust fund would run out of assets by 2037, triggering painful benefit cuts. Today, the situation has deteriorated further, with the trust fund now on track to run dry in 2035, along with any practicable hope for fixing the problem.

In other words, these problems shouldn't surprise anyone. When Social Security started, life expectancies were lower. In 1950, there were more than 16 workers for every beneficiary. That ratio is now below three workers per retiree and will be only 2.3 workers per retiree by 2035. Add to this trend decades of politicians buying votes by expanding benefits beyond incoming payroll taxes and you have a true fiscal crisis on your hands.

That's why it's so alarming that so many in the GOP are giving up on educating a public that's been brainwashed for years with misleading soundbites like "You earned your Social Security benefits, so you are entitled to the benefits now promised," or "There's an account with your name on it." Such misinformation has made serious discussion of reform very difficult.

There's no question that retirees deserve fair treatment, but the facts are that the Supreme Court ruled in 1960 that workers do not have a legally binding right to Social Security benefits, and if Congress cuts benefits even by, say, 50 percent, it can do so—no matter how much anyone has paid into the program. It won't come to that, but the ruling still stands. It's also fiction that all the benefits that have been promised were earned by workers—they weren't. That's in part because current retirees are paid with taxes from current workers, not from funds saved out of the payroll taxes retirees paid when they were in the workforce.

It's magical thinking to say that touching Social Security and Medicare is a nonstarter. Even more strange, many of the same Republicans want to spare these two programs while still putting Medicaid on the chopping block. Medicaid should be reformed too, but at least that program serves poor people. By contrast, the seniors who receive Social Security and Medicare today are overrepresented in the top income quintile while younger Americans are overrepresented in the bottom quintile. So these guys want to cut benefits for poor people on Medicaid while subsidizing relatively wealthy boomers with taxes taken from relatively poor youngsters. Yikes.

The GOP's transformation into the party of big and fiscally reckless government is proceeding apace.

Uni-party to the max.